Where to invest your money in 2018: UAE real estate

Cluttons expects values to decline by an average of three to five percent by the end of 2018. The rental market is expected to mirror the performance of capital values.
Photo: MARWAN NAAMANIAFPGetty Images

By Faisal Durrani

Sun 21 Jan 2018 11:46 AM

Rents in both commercial and residential sectors in Abu Dhabi will be under pressure, writes Faisal Durrani, global head of research, Cluttons

Dubai residential

We had predicted that residential values would end 2017 down by five percent, in line with our expectations at the start of the year.

2018 still has the potential for values to start bottoming out in the second half of the year, but much will depend on the yet-to-materialise “Expo 2020 effect”, the strength of the US dollar and a slowing in both the rate of delivery and type of new residential schemes announced, with “affordable” housing being key to helping the market stabilise.

On balance, we expect values to decline by an average of three to five percent by the end of 2018. The rental market is expected to mirror the performance of capital values.

Dubai commercial

Dubai’s office market has been quite resilient, owing to the far more diverse nature of the occupiers in Dubai, which of course is linked to the emirate’s heavily diversified economy.

With the market remaining fragmented and the introduction of VAT, office rental rates held up reasonably well in many submarkets in 2017.

We expect this resilience to persist in the first quarter of 2018 as well, with any declines this year likely to be contained at four to five percent at most.

The main upside risk for the market remains the impact of Expo 2020 and the potential of the mega-event to create fresh demand for office space as companies expand, or set up shop in greater numbers across the emirate to help deliver the city’s ambitious construction and infrastructure projects in the run up to 2020.

Abu Dhabi residential

2018 is likely to see rents slipping further, with newly completed buy-to-let stock becoming a particular challenge in some of the city’s newer neighbourhoods.

Rents for 2018 are likely to see further declines in the region of five to seven percent, unless there is a notable rebounding in economic growth, which would have to be underpinned by a turnaround in oil prices. This appears unlikely at this stage.

Abu Dhabi commercial

Our expectation is for office rents to remain under pressure across Abu Dhabi during 2018.

We predicted office rents would end 2017 roughly five to 10 percent down, compared to this time last year, and it is our view that a similar pattern is likely during 2018, with occupiers likely to continue capitalising on weak rents by relocating and consolidating operations where possible.

The key to unlocking the current stalemate will be a turnaround in oil price growth and perhaps an easing of the cost containment measures introduced by the government in the wake of the oil price collapse in 2014.